@ChrisF It's been a while since I played, but I'm fairly sure it was regrowing since I would dye the sheep colors that are not natural and sheer the colored wool regularly
–
RachelOct 3 '11 at 12:19

I've killed off all the local animals, and have yet to see any respawning :( Since passive mobs don't require grass to respawn any more, it's possible they're stuck in a cave somewhere...
–
CyclopsOct 3 '11 at 12:38

@Cyclops they can't be stuck in a cave, they always spawn at the highest available (opaque?) level.
–
agfOct 3 '11 at 19:37